Social Media Pioneer Digg Sold For Much Less Than Original Value

In a surprise move for the entire online business community, social bookmarking site Digg was sold last week  for the unimpressive sum of $500,000. (Edited to add:  The Wall Street Journal originally reported it as selling for just $500,000, although  later reports pegged that number considerably higher when you factor in the patents that Digg owned and the engineering team.  One report says it was split three ways for a total of roughly $16 Million.  Whichever way you slice it, that number is much less than the $45 Million the site had been valued at years earlier. And the value of the site itself, i.e., the part that went to Betaworks, was pretty low. )

Some insist the sale was a final step in what has been a steady decline for the social media pioneer. Whatever the ultimate cause, there is a belief in the online entrepreneur community that Digg’s downward slide may be a cautionary tale about what happens when you don’t pay enough attention to your customers and community.

Digging In

A new beginning. Though for many the sale of a social bookmarking site of Digg’s calibre to New York-based incubator Betaworks for a fraction of what the site might have once been valued seems like a disaster. But on the company blog late last week, Digg CEO Matt Williams insisted the purchase was “a way to take Digg back to its startup roots.” Many businesses from time to time must reevaluate where they stand with their customers, but hopefully this can be done before the company is up for sale. Digg Blog

One of the great Internet brands. Although it may have been acquired for less than the funds it originally raised, Digg’s value is considerable according to Betaworks. Loved by millions, Digg’s reputation as a great brand known for pioneering the concept of community-driven news that has since become a major part of the Internet’s ecosystem, remains an asset. But no matter how valuable the brand, a connection to a site’s community is what’s really important. Betaworks

Paradise Lost

The slippery slope. Just as there’s no such thing as overnight success, the decline of a business is also a gradual process. Businesses do not generally fail because of one poor decision, but as a result of a series of poor decisions made over time. Those observing Digg’s decline point to a number of missteps that may have led to the brand’s difficulties after it established itself as a leader in community news. It’s important to consider how each of your decisions will affect your business long-term. Gigaom

For what it’s worth. Determining a realistic value for your business is an important skill. Entrepreneurs must understand how much their business is worth, not just to them, but to others. Effectively valuing your business has to do with understanding what your product, service, or company really provides to others. For example, in the case of social bookmarking sites like Digg, it can be argued that a network or site is worth exactly as much as its community. The Atlantic

Reaping the benefits. Even unsuccessful companies can be a benefit to other entrepreneurs in terms of the legacy and resources they leave behind. Two other companies, LinkedIn and The Washington Post, have benefited tremendously from last week’s sale of Digg to Betaworks. While LinkedIn has acquired a number of patents from the social bookmarking site, The Washington Post’s Web development arm acquired most the Digg team. TechCrunch

In Conclusion

Their own worst enemy. Business owners look instinctively to competitors when trying to figure out how to make the necessary business model tweaks for long-term survival. But, as Digg’s difficulty shows, sometimes companies need to look no further than themselves for the source of their problems. Atrocious redesigns, sponsored links, and a failure to cultivate its community all lead to Digg’s decline. Knowing what keeps your customers coming back is important and can keep you from making similar mistakes. Forbes

Filling the void. Digg’s departure from the scene or, at the very least, its considerable decline, may create opportunities for other Internet entrepreneurs. Some are already asking who will fill the void left by Digg. Certainly, Digg’s greatest competitor, Reddit, has gained much from Digg’s fall, but social media networks like Facebook and Twitter are also catching up with Google search as two of the chief ways people find news on the Web. Other tools to fill the space left by Digg remain to be seen. The Wall Street Journal

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11 Reactions
  1. Martin Lindeskog

    Who bought Digg? The domain name as such could be worth a lot. I look forward to hear Kevin Rose’s take on the situation.

    • Hi Martin — Well, the domain name and the site itself (along with the traffic) was bought by Betaworks. According to reports, it looks like patents were sold to LinkedIn and the engineering team was “acquired” by the Washington Post.

      It sounds like an odd 3-way deal. And clearly, being broken up and sold for parts means the site itself was not deemed to have a great deal of value.

      – Anita

      • Martin Lindeskog

        Anita: Thanks for the information. It is interesting to hear that LinkedIn bought the patents. Could it have to do something with the “thumbs” up & down voting system and the forum thread architecture?

        It is a bit strange that Washington Post got hold of the team. Mainstream media vs. new media?

        Have you thought on how this deal could lead to more interest in the world of bookmarking sites?

  2. Great post. I hadn’t heard about Digg being bought.

  3. It is really a shame they let their site fall the way they did. I think when they implemented the 4th version of the site it drove the core audience away. They really screwed up big time because after they released V4, the majority of their audience went to Reddit.

    The biggest takeaway I got from seeing all of this go down is that they tried to fix what wasn’t broken.

  4. I was really surprised when I saw that Digg only sold for $500k.

    What does Reddit do, that’s so different? What does Delicious do that’s so special.

    I’ve never had that much luck from those two bookmarking sites; maybe I just don’t have the patience needed to spend hours on them in the hopes that I’ll get a couple of thousand, “hits.”

    I have a feeling that the fast-traffic that comes in from those two sites isn’t the sticky-type.

    But, I still bookmark when I can.

    The Franchise King®

  5. If you’re going to survive in social media you need to continue to evolve and adapt to customer needs. You also need to provide a unique product. The social bookmarking market has too many players that offer similar things.

  6. I really enjoyed this post! The different perspectives you brought together really made me think. Thanks! -Kate

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